Will Silvio Berlusconi’s Exit Fix Italy’s Finances?
With the announcement that Italian Prime Minister Silvio Berlusconi will voluntarily leave his post following a humiliating vote in Italian Parliament, many economic analysts are now asking, what will a Berlusconi exit mean for Italy and the euro zone’s financial woes?
Berlusconi said that he would step down as soon as the Italian Parliament passed measures urged by European leaders to shore up Italy’s debt crisis and promote growth in the stagnating country.
Berlusconi failed to reach a majority in the key vote for austerity reforms Tuesday. This heavily increased the pressure on the 75-year-old PM to resign from his post, in order to reach an agreement to save his country from debt insolvency.
Get Our Latest News for FREE
As the euro zone’s third largest economy, Italy is considered "too big" to fail and has been at the epicenter of Europe’s sovereign debt crisis, along with Spain since this past summer.
Many in the euro zone fear that Italy will head down the same bailout path as Ireland, Portugal, and Greece, as its yields on government bonds are at nearly unsustainable levels. European leaders have expressed the inability for Italy to fail due to the consequences a failure would have on the entire euro zone.
However, analysts are saying even with Berlusconi gone, Italy’s financial breakdown will not be easy to curb.
Economic analysts argue that Italy will need to replace its leadership with leaders that are capable of implementing measures that will restrain Italy’s debt crisis. However, even with the proper leadership it will take time to convince markets that investing and lending to Italy is a worthwhile venture.
Furthermore, there is no guarantee that necessary reforms will be implemented in a timely fashion or that the market's response to reforms will be enduring.
The European commissioner for economic and monetary affairs has said that the commission finds the economic situation in Italy troubling and will be “following the situation closely” in the coming months.
Whether Italy is able to implement painful but necessary reforms and curb its debt post-Berlusconi remains to be seen. Regardless, with a crisis that is linked to the stability of the entire euro zone, the result is sure to be played out on the international stage.
